Correlation Between SPORTING and GMO Internet

Can any of the company-specific risk be diversified away by investing in both SPORTING and GMO Internet at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SPORTING and GMO Internet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPORTING and GMO Internet, you can compare the effects of market volatilities on SPORTING and GMO Internet and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SPORTING with a short position of GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORTING and GMO Internet.

Diversification Opportunities for SPORTING and GMO Internet

0.12

Correlation Coefficient

SPORTING  GMO Internet

Average diversification

The 3 months correlation between SPORTING and GMO is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and SPORTING is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SPORTING are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of SPORTING i.e., SPORTING and GMO Internet go up and down completely randomly.

Pair Corralation between SPORTING and GMO Internet

Assuming the 90 days trading horizon SPORTING is expected to under-perform the GMO Internet. In addition to that, SPORTING is 1.72 times more volatile than GMO Internet. It trades about -0.01 of its total potential returns per unit of risk. GMO Internet is currently generating about 0.15 per unit of volatility. If you would invest  1,614  in GMO Internet on December 20, 2024 and sell it today you would earn a total of  306.00  from holding GMO Internet or generate 18.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SPORTING  vs.  GMO Internet

SPORTING

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPORTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPORTING is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GMO Internet

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPORTING and GMO Internet

The main advantage of trading using opposite SPORTING and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORTING position performs unexpectedly, GMO Internet can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GMO Internet will offset losses from the drop in GMO Internet's long position.

The idea behind SPORTING and GMO Internet pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.